‘No SunEdison shadow’ on Indian renewable sector

Debabrata Das New Delhi | Updated on January 27, 2018

US energy major’s bankruptcy has not affected investor interest

The bankruptcy proceedings of global renewable energy major SunEdison has not impacted investor interest for India’s renewable energy sector.

This is according to Darko Hajdukovic, Head of Research and Product Innovation (Primary Markets) at London Stock Exchange and Jasmine Arora, Head of India, Africa and Middle East for Primary Markets – Equity and Debt for London Stock Exchange.

“The SunEdison event is primarily a US-based event. We do have investment funds listed on the London Stock Exchange which provide yields but they are not yieldcos.

“The yieldco structure inherently requires a company to come back to the market regularly but the investment funds are not forced to do so and therefore the investment fund model is far more sustainable,” Hajdukovic told BusinessLine.

Arora added that depending on the type of investor base renewable energy firms want to tap into, there are three ways of raising funds from the London Stock Exchange.

Three options

“Some investors want equity and have a strong desire to invest in the management of a particular firm, for getting such investors, IPOs is the option. For raising debt, the London Stock Exchange provides for raising funds through rupee denominated bonds or masala bonds as well as green bonds and finally for investors seeking a share of the yields, forming an investment fund is the way to tap in to the market,” said Arora.

In the ‘yieldco’ model, SunEdison sells its power plants to a yieldco company owned by it, which in turn collects revenue and pays dividend to shareholders. SunEdison has two yieldcos — TerraForm Power and TerraForm Global, with the latter focussed on emerging markets.

“It is the way it was set up that fuelled the problems. We have investment funds which don’t have such complexities,” said Arora.

Investment funds are similar as they too raise money from the primary markets and provide shareholders with a steady income stream through an annual dividend.

This comes through the revenue of the assets owned by the investment funds. However, investment funds have a longer history of existence and offer a broader selection of investment opportunities.

Interest in masala bonds

Meanwhile, Arora also said that there remains a lot of interest for rupee denominated bonds or masala bonds to be raised by the Indian companies in the London Stock Exchange.

“We have 12 live masala bonds on the London Stock Exchange and Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy, announced 3 to 5 more masala bonds to raise £1 billion with a tenure of 3 to 5 years. He did that immediately after listening to a roundtable of investors,” said Arora.

“We have now got an established yield curve of masala bonds. The beauty of it is that when someone is coming into the market to raise money they can benchmark themselves according to the yield curve. This is something that no other exchange has yet,” she added.

Published on April 26, 2016

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